Highlights

From riding high on cobalt’s boom, Glencore Plc traders are feeling the heat as falling prices and reneged contracts put a dent in profit.

The world’s largest commodities merchant on Monday downgraded its full-year earnings target for the trading division to $2.6 billion to $2.8 billion, down from an earlier estimate of $2.7 billion to $3.2 billion.

Some cobalt buyers in China reneged on contracts after seeing prices plunge, forcing the company to renegotiate the commercial terms of the deals, Glencore Chief Executive Officer Ivan Glasenberg told reporters. Benchmark cobalt prices have dropped more than 25 percent since a peak in April.

Like rival miner Rio Tinto Group, Glencore also lost money on certain long-term alumina deals this year. Its exposure to price moves in the contracts should be minimal in 2019, the company told analysts and investors. But for its cobalt traders, there’s a risk that this year’s poor performance will persist if in-house inventories continue to stack up and prices remain under pressure, Chief Financial Officer Steve Kalmin signaled on Monday’s calls.